Slow start for Europe November PE, PP business

09 November 2012 11:34  [Source: ICB]

European polyethylene (PE) and polypropylene (PP) business has been slow to start for November, following the limited change in upstream ethylene and propylene contract settlements, sources say.

November's propylene monomer contract fell €20/tonne ($26/tonne) to €1,120/tonne FD (free delivered) NWE (northwest Europe), whilst ethylene slipped by €15/tonne, to €1,275/tonne.

EU Polyolefins"There is no great appetite, either on the buy or sell side, for a price slide," said one PE producer, and most sellers have ideas of a rollover or slight erosion.

Many buyers, and sellers too, have found the volatility of pricing in 2012 difficult to manage, and some fear another price fall in the fourth quarter, only to be followed by another strong upward move in January as producers try to claw back margins. Production is cut back at all levels with this in mind, as players do not want high-priced stock.

Naphtha and crude oil prices remain high, and cracker and polymer production is estimated at 70-80% in Europe, to accommodate reduced demand. Sources say it is not feasible for crackers to run at this rate long term and hint that permanent closures will inevitably occur, as competition from low-cost feedstock increases.

PP is in a better balance than PE, due mainly to cutbacks and minor production hiccups that have kept some producers tight. "We don't expect quarter four demand to pick up," said one PP producer, "but there isn't much oversupply in the market."

While neither PE nor PP buyers expect a collapse in pricing in November, most are confident that they will achieve a bigger drop than the one currently proposed. "We've been offered an initial drop of €15/tonne, but expect more by the end of the month," said one buyer.

Expectations of a bigger decrease than the one in the monomer contracts are high and likely to be met, but most buyers talk of a €40-50/tonne drop, not much more.


Low density polyethylene (LDPE) net prices are trading in a wide range, with some spot offers from producers at €1,250/tonne FD NWE. PP homopolymer injection is reported at similar levels, on a net basis.

For December some converters expect low demand to lead to special offers, and most plan to buy minimally as it is unlikely prices will rise short term. "PE prices have gone up in January in the last four years," said one large buyer. "I can see this happening again in 2013. Demand is poor, December prices crash, prices back up in January. Nothing changes."

By: Linda Naylor
+44 20 8652 3214

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